On 9th June 2021, the Law Commission published its paper on Corporate Criminal Liability. This was in response to widespread concern that the current approach to attributing corporate criminal liability in the UK, through the identification principle, is both overly complex and ineffective in holding companies to account for the criminality of their board members, senior management and employees.
This legal principle tends to be applied disproportionately to smaller entities rather than larger companies which often have complex management structures in place. It is hardly surprising, therefore, that the prevailing approach in the UK to economic crime has been to prosecute individuals and impose regulatory fines on corporates.
The issue here is not, broadly, whether the law needs reforming, it is how a clear consensus can be reached as to which legal measures, if any, should be implemented to punish offences committed by non-natural persons. Opinions range widely, from the preservation of the status quo to the use of regulatory bodies instead of the criminal law, to the introduction of strict or vicarious liability offences, to the extension of the ‘failing to prevent’ offences model. As one would imagine, each has its own drawbacks.
Over the last few years, some high-profile figures such as the Director of the SFO have called for the rolling out of statutory ‘failure to prevent’ economic crime offences, building upon those brought in by the Bribery Act 2010 and the Criminal Finances Act 2017. Broadly speaking, those two laws currently hold commercial organisations liable for failing to prevent persons associated with them from committing bribery and tax evasion.
Supporters of the ‘failing to prevent’ model argue that current bribery and tax legislation has noticeably, and positively shaped corporate governance, compliance and enforcement policies. Further, it is likely that any new legislation would allow corporates to raise defences of having adequate or reasonable procedures in place. It may also lead to a greater number of companies entering into Deferred Prosecution Agreements, a power given to the Court to approve a financial penalty and compensatory payments which have been agreed between a company and the prosecutor.
The ‘failing to prevent’ approach is not flawless. Significantly extending the scope of the model beyond bribery and tax evasion offences could place a very substantial compliance burden on companies and may be difficult to define for such a wide range of ‘economic crime’ offences. It appears to be, however, the option garnering most support amongst government, business and the legal community.